Washington: The International Monetary Fund on Tuesday reduced its forecasts for growth in the United States, China and most countries, which will now slow down the impact of US tariffs at a 100 -year high, and warns that further trade would slow down the increase in stress.
The IMF released an update for its World Economic Outlook, which was compiled in 10 days only after the announcement of universal tariffs almost all business partners and universal tariffs at high rates by US President Donald Trump – currently suspended on many countries.
This increased its forecast for global growth by 0.5 per cent for 2025 to 2.8%, and its January forecast increased from 0.3 per cent to 3% that growth would reach 3.3% in both years.
It said that in January was expected to decline more gradually, given the impact of tariffs, 4.3% in 2025 and 3.6% in 2026, with “notable” amendments for the US and other advanced economies.
The IMF called the report a “reference forecast” based on the events through April 4, citing the extreme complexity and liquidity of the present moment.
“We are entering a new era as the IMF Chief Economist Pierre-Olivier Gourinchas told reporters,” we are entering a new era as the global economic system has been reset for the last 80 years. “
The IMF stated that uncertainty about future policies would have a significant impact on global economic activities of trade tension and rapid growth of “extremely high levels”.
“This is quite important and it is killing all regions of the world. We are seeing low growth in America, low growth in Euro sector, low growth in China, low growth in other parts of the world,” Gauinchas told Reuters in an interview.
He said, “If we get an increase in trade tension between the US and other countries, it will promote additional uncertainty, which will create additional financial market volatility, which will tighten financial conditions,” he said, adding the bundle effect reduces the chances of global development.
He said that the possibilities of weak development had already reduced the demand for dollars, but said the adjustment in the money markets and the portfolio reinforcement seen till date, he said.
“We are not looking for a stampede or a run to get out,” Gourinchas said. “We are not worried about the flexibility of the international monetary system at this level. It will be much larger than this.”
However, the possibility of medium-term growth remains average, the five-year forecast stuck at 3.2%, below the historic average of 3.7% from 2000–2019, there is no relief with no relief in sight.
The IMF increased its forecast by 1.5 percentage points to 1.7%for growth in global trade, showing half the growth in 2024, quick fragmentation of the global economy.
The trade will continue, but its cost will be higher and it will be less efficient, said, citing confusion and uncertainty, where to invest, where products have to be sourced and components to buy. He said, “Restoring the prediction, whatever clarity is very important for the trading system in any form,” he said.
US growth down, inflation
The IMF reduced its forecast for US growth to 0.9 percent in 2025 – a full percentage point from 2.8% increase in 2024 – and up to 0.4 percentage points in 2026, up to 1.7%, citing policy uncertainty and trade tension.
Gourinchas told reporters that IMF was not estimating the recession in America, but the possibility of recession had increased from about 25% to 37%. He said that the IMF was now estimating the US headline inflation to reach 3% in 2025, due to one percent more marks in January and the strength in the services.
This meant that the Federal Reserve would have to be very cautious in anchoring the expectations of inflation, Gurinchas said, given that many Americans were still scared of spikes in inflation during the Kovid epidemic.
When asked about the impact of any step by the White House to remove the Fed Chair Zerome Powell, Gaurinchas said it was “absolutely important” that the central bank was able to remain free to maintain its credibility in addressing inflation.
US stocks damaged losses on Monday as the US President extended his attacks on Powell, fulfilling concerns about Central Bank’s freedom.
The American neighbor Canada and Mexico, both targeted by a series of tariffs by Trump, also cut their development forecast. The IMF forecast Canada economy will increase 1.4% in 2025 and 1.6% in 2026, rather than 2% increase for both years in January.
It was predicted that with a decline of negative 0.3% in 2025 in 2025 in 2025, it would be difficult from Mexico tariffs with its growth, falling 1.7 percent from the January forecast, before an increase of 1.4% in 2026.
Low growth in Europe, Asia
IMF’s forecast increase in the Euro region will slow down by 0.8% in 2025 and 1.2% in 2026, with both forecasts below January about 0.2 percentage points from January. It stated that Spain was an exterior, which predicted an increase of 2.5% for 2025, a 0.2 percentage point upward amendment, which reflects strong data.
Increasing wages in offsetting forces were included after a major change in “debt break” due to strong consumption due to increasing wages and an estimated fiscal ease in Germany. The IMF cut off its growth for Germany to 0.3 per cent marks from 0.0% in 2025 and 0.2 percent in 2026 to 0.9%.
The increase in Britain will exceed 1.1% in 2025, 0.5 percent of the January forecast, exceeding 1.4% in 2026, reflecting the effect of recent tariff declarations, high gilt yields and weak private consumption.
Compared to the January forecast, trade tension and tariff were expected in 2025 with a decrease of 0.5 percent from Japan’s economic activity, with an increase of 0.6%.
The January 2025 and 2026, depicting the 0.6 percent point from the January forecast and 0.5 percent point, were cut off up to 4% for China’s development for 2025 and 2026.
Gourinchas said the impact of tariffs on China – extremely dependent on exports – 2025 had about 1.3 percent point, but it was offset by strong fiscal measures.
